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2018 (364) E.L.T. 273 (Tri.-Bom) [27-10-2017]

2018 (364) E.L.T. 273 (Tri. - Mumbai)

IN THE CESTAT, WEST ZONAL BENCH, MUMBAI

[COURT NO. I]
Dr. D.N. Panda, Member (J)

TEJINDER SINGH MAKKAR

Versus
COMMISSIONER OF CUSTOMS (EP), MUMBAI
Final Order No. A/90279/2017-WZB/SMB, dated 27-10-2017 in Appeal No. C/1271/2008-Mum

Penalty - Imposition of - DEPB scrips obtained fraudulently from DGFT and sold - Circumstances of high
degree of probability indicated active, conscious involvement in defrauding revenue, and pre-determined
mind to deceive exchequer - It was case of fraud - As Indian Evidence Act, 1872 was not applicable to quasi-
judicial proceeding, preponderance of probability was sufficient and Revenue was not required to prove its
case by mathematical precision - Hence, person who committed this was liable to penalty - Section 112(a) of
Customs Act, 1962. [paras 7, 8, 10, 11, 12]
Evidence - Proof - Perfect proof is not insisted on as it is seldom found in imperfect world - Definition of
proof under Section 3 of Indian Evidence Act, 1872 does not distinguish between circumstantial and other
evidence. [para 8]
Interpretation of statutes - Penal provisions - They suppresses evils of defrauding revenue which is
anti-social activity adversely affecting public revenue, earning of foreign exchange, economic and financial
stability of economy - Hence, such provisions are construed to suppress mischief and promote object of
statute, preventing evasion, and foiling artful circumvention thereof. [paras 10, 12]
Appeal dismissed

CASES CITED
Ashok Leyland Ltd. v. State of T.N. — (2004) 3 SCC 1 — Relied on................................... [Para 9]
Commissioner v. Candid Enterprises — 2001 (130) E.L.T. 404 (S.C.) — Relied on............. [Para 9]
Commissioner v. Essar Oil Ltd. — 2004 (172) E.L.T. 433 (S.C.) — Relied on...................... [Para 9]
Delhi Development Authority v. Skipper Construction Company (P) Ltd. — AIR 1996 SC 2005 — Relied on [Para 9]
Gowrishankar v. Joshi Amha Shankar Family Trust — (1996) 3 SCC 310 — Relied on...... [Para 9]
K.I. Pavunny v. Assistant Collector — 1997 (90) E.L.T. 241 (S.C.) — Relied on................. [Para 9]
Ram Chandra Singh — Relied on............................................................................................. [Para 9]
Ram Preeti Yadav v. U.P. Board of High School and Intermediate Education — (2003) 8 SCC 311 — Relied on [Para 9]
Roshan Deen v. Preeti Lal — (2002) 1 SCC 100 — Relied on................................................ [Para 9]
S.P. Chengalvaraya Naidu v. Jagannath — AIR 1994 S.C. 853 — Relied on........................ [Para 9]
Union of India v. Jain Shudh Vanaspati Ltd. — 1996 (86) E.L.T. 460 (S.C.) — Relied on.. [Para 9]

REPRESENTED BY : None, for the Appellant.

Shri S.J. Sahoo, Asstt. Commr. (AR), for the Respondent.
 [Order]. - Record reveals that the appellant Shri Tejindeer Singh Makkar @ Billa was noticed to be one of the brains
behind sale of Duty Exemption Pass Book (DEPB) scrips obtained from Jt. DGFT under fraud and he was beneficiary of aggregate
value of DEPB scrips of Rs. 1.5 crore as well as scrips value of Rs. 1.5 crore receivable. When Learned Adjudicating Authority
found him guilt of being involved in defrauding Revenue, he imposed penalty of Rs. 2,00,000/-. Against such action of
adjudicating authority, appellant has come in appeal praying for waiver of such penalty.
1.2 On scrutiny of DEPB scrip No. 03608764 used by Unique Exim to make duty free import, Customs authority noticed
that there were no exports made through Shipping Bill No. 1000139618, dated 30th June, 1998 used to get the above scrip from
Jt. DGFT. When the matter was investigated, it came to light of Revenue that the documents filed before Jt. DGFT to obtain the
DEPB scrips were fake including the BRC Bearing No. 0305023, dated 16-7-1998 claimed to have been issued by Union Bank of
India, Bandra, Mumbai. The DGFT, Mumbai cancelled the offending scrips. But using such fraudulently obtained DEPB scrips,
import made by Unique Exim was claimed to be duty free. Such claim was denied by Customs.
2. On 15-1-1999, appellant stated to the investigation that he was partner of M/s. Platinum Exports along with one Shri
Deepak Agarwal @ Dabbu and Shri Lalit Goswami and gained experience of defrauding Government selling DEPB scrips
obtained under fraud from Jt. DGFT without making any physical export. According to investigation, these persons were involved
in sale of ab initio void DEPB scrips in the market, obtaining that under fraud. Shipping bills were filed in the name of non-
existing firms viz., M/s. Pacific Corporation, M/s. Pearl Exports, M/s. Universal Trading Co. and M/s. Unique Exim before Customs
and those were taken back after passing thereof by the Customs Officers. Deepak also floated a firm called M/s. Pegasus
Manufacturing Co., showing Shri Diamond Messey as proprietor thereof. Without any physical export being done, false shipping
bills were passed by Customs and DEPB scrips were obtained on the basis of such documents by such non-existent concerns. No
foreign exchange came to India against such false shipping bills and false Bank Realization Certificates (BRCs) which were filed
by these concerns before Jt. DGFT to get DEPB scrips. The scrips so obtained were sold in the market to various concerns for use
thereof to make duty free import deceiving Government.
2.1 One Shri Ramanlal Acharya @ Kakaji was holding out to be proprietor of the above said fake concerns viz. Pearl
Exports, Pacific Corporation, Universal Trading Co., and Unique Exim with false address at Veena Beena Shopping Centre,
Bandra (W) and Razakwadi, Bandra (E) and was abetting commitment of the offence stated above. Different signatures were
made on different forged and fake documents by him for presentation before Customs and Jt. DGFT. Fake application for IEC
was made by that abettor. The photographs pasted on the IEC application forms were procured from different photo studios and
were of unknown persons.
2.2 Appellant gaining experience from Shri Deepak Agarwal @ Dabbu and working with Shri Arun Gupta, Ashok Khema
of Delhi and also with Shri Jasbir Singh of Mumbai who were obtaining DEPBs scrip without making any physical export and
without receiving any foreign remittance in designing fraud against Revenue and getting DEPB scrips under fraud, he himself
printed fraudulent documents contacting one Shri Aziz to get DEPBs from Jt. DGFT in the above said manner without making
actual export and without any foreign remittance came to India.
2.3 Appellant succeeded in passing 4 false shipping bills through one Shri Yashpal from Delhi Customs House and with
the illgained experience of processing false shipping bill, he obtained DEPB scrips producing false BRCs before DGFT. Fabricated
rubber stamps were made in the name of Customs to affix false seals on the shipping bills. Those were made from stamp
makers of Dadar (East). Kakaji, the conduit was engaged by appellant to sign various documents and to contact the licence
broker Shri Vinay Saigal to get the DEPB scrips from DGFT paying him 10% of the DEPB value as commission. The scrips were
registered in the Delhi Customs before sale thereof. One such sale of DEPB scrips to one Shri O.P. Ahuja was investigated. It was
noticed by Revenue that sale proceed of DEPB scrip came through bank drafts and such drafts were encashed by Shri Aziz
getting 5% commission. Signatures of Bank officers were forged and bank accounts were opened to deposit the Demand Drafts
came from illegal sale proceeds of the scrips of the aforesaid nature.
3. The manner in which the appellant acted as above, he proved himself to be an offender under Customs Act, 1962
causing detriment to the interest of Customs. His defence plea that it was innocent was discarded by the adjudicating authority
on the basis of probe result demonstrating his fraud and forgery committed, as discussed above.
4. None present for the appellant.
5. Revenue submits that fraud committed by appellant in the manner stated in the adjudication order proved his
contumacious conduct and deliberate intention to cause evasion committing fraud against Revenue for which his appeal should
be dismissed in absence of any evidence to the contrary led by the appellant. There is no rebuttal by the appellant against the
probe result aforesaid without any good reason advanced by the appellant or any cogent or credible evidence adduced to prove
his innocence.
6. Heard Revenue and perused the record. The investigation result and findings of Learned Adjudicating Authority
remained uncontroverted by the appellant in his grounds of appeal.
7. Impugned DEPB scrips were obtained by appellant fraudulently from Jt. DGFT and that was sold by him. He was
actively and consciously involved in defrauding revenue for which interest of Customs was prejudiced. Appellant was not at all a
stranger to the commission of the offence alleged by investigation. Having pre-determined mind to deceive the exchequer, he
perpetuated fraud against Revenue. Accordingly, he was liable to the penal consequence provided under Section 112(a) of the
Customs Act, 1962.
8. Evidence Act, does not insist on absolute proof for the simple reason that perfect proof in this imperfect world is
seldom to be found. That is why under Section 3 of the Evidence Act, a fact is said to be ‘proved’ when, after considering the
matters before it, the Court either believes it to exist or considers its existence so probable that a prudent man ought, under the
circumstances of the particular case, acts upon the supposition that it exists. This definition of ‘proof’ does not draw any
distinction between circumstantial and other evidence. Preponderance of probability comes to rescue of Revenue and Revenue
is not required to prove its case by mathematical precision. Thus, if circumstances establish that there is high degree of
probability that a prudent man ought to act on the supposition that there was design to obtain DEPB scrips without any export
and such scrips sold for duty free import in contravention of the law or abetting to achieve such ill object, such act against public
Revenue calls for penal consequence to curb such mischief.
9. Fraud in the eyes of law is viewed as under :

(A) If a party makes representations which he knows to be false and injury ensues therefrom
although the motive from which the representations proceeded may not have been bad is
considered to be fraud in the eyes of law. It is also well-settled that misrepresentation itself
amounts to fraud when that results in deceiving and leading a man into damage by wilfully or
recklessly causing him to believe on falsehood. Of course, innocent misrepresentation may
give reason to claim relief against fraud. In the case of Commissioner of Customs, Kandla v. Essar
Oil Ltd. - 2004 (172) E.L.T. 433 (S.C.) it has been held that by “fraud” is meant an intention to
deceive; whether it is from any expectation of advantage to the party himself or from the ill-
will towards the other is immaterial. “Fraud” involves two elements, deceit and injury to the
deceived.

(B) Undue advantage obtained by the deceiver will almost always cause loss or detriment to
the deceived. Similarly a “fraud” is an act of deliberate deception with the design of securing
something by taking unfair advantage of another. It is a deception in order to gain by
another’s loss. It is a cheating intended to get an advantage. [See : S.P. Chengalvaraya Naidu v.
Jagannath - (1994) 1 SCC 1 = AIR 1994 S.C. 853. It is said to be made when it appears that a false
representation has been made (i) knowingly, or (ii) without belief in its truth, or (iii) recklessly
and carelessly whether it be true or false Ref : Roshan Deen v. Preeti Lal - (2002) 1 SCC 100, Ram
Preeti Yadav v. U.P. Board of High School and Intermediate Education (2003) 8 SCC 311, Ram
Chandra Singh’s case (supra) and Ashok Leyland Ltd. v. State of T.N. and Another - (2004) 3 SCC 1].

(C) Suppression of a material fact would also amount to a fraud on the Court [See :
Gowrishankar v. Joshi Amha Shankar Family Trust, (1996) 3 SCC 310 and S.P. Chengalvaraya Naidu’s
case - AIR 1994 S.C. 853]. No judgment of a Court can be allowed to stand if it has been
obtained by fraud. Fraud unravels everything and fraud vitiates all transactions known to the
law of however high a degree of solemnity. When fraud is established that unravels all. [Ref :
U.O.I. v. Jain Shudh Vanaspati Ltd. - 1996 (86) E.L.T. 460 (S.C.) and in Delhi Development Authority v.
Skipper Construction Company (P) Ltd. - AIR 1996 SC 2005. Any undue gain made at the cost of
Revenue is to be restored back to the treasury since fraud committed against Revenue voids
all judicial acts, ecclesiastical or temporal and DEPB scrips obtained playing fraud against the
public authorities are non est. So also no Court in this country can allow any benefit of fraud to
be enjoyed by anybody as is held by Apex Court in the case of Chengalvaraya Naidu reported in
(1994) 1 SCC I = AIR 1994 SC 853. Ram Preeti Yadav v. U.P. Board High School and Intermediate
Education - (2003) 8 SCC 311.
(D) A person whose case is based on falsehood has no right to seek relief in equity [Ref : S.P.
Chengalvaraya Naidu v. Jagannath, AIR 1994 S.C. 853]. It is a fraud in law if a party makes
representations, which he knows to be false, and injury ensues therefrom although the motive
from which the representations proceeded may not have been bad. [Ref : Commissioner of
Customs v. Essar Oil Ltd., (2004) 11 SCC 364 = 2004 (172) E.L.T. 433 (S.C.)].

(E) When material evidence establishes fraud against Revenue, white collar crimes
committed under absolute secrecy shall not be exonerated as has been held by Apex Court’s
judgment in the case of K.I. Pavunny v. AC, Cochin - 1997 (90) E.L.T. 241 (S.C.). No adjudication is
barred under Section 28 of the Customs Act, 1962 if Revenue is defrauded for the reason that
enactments like Customs Act, 1962, and Customs Tariff Act, 1975 are not merely taxing
statutes but are also potent instruments in the hands of the Government to safeguard
interest of the economy. One of its measures is to prevent deceptive practices of undue claim
of fiscal incentives.

(F) It is cardinal principle of law which is enshrined in Section 17 of Limitation Act that fraud
nullifies everything for which plea of time-bar is untenable following the ratio laid down by
Apex Court in the case of C.C. v. Candid Enterprises - 2001 (130) E.L.T. 404 (S.C.). Non est
instruments at all times are void and void instrument in the eyes of law are no instruments.
Unlawful gain is thus debarred.

(G) Fraud and justice do not dwell together for which penal provisions are enacted to
eradicate evils of defrauding Revenue which is anti-social activity adversely affecting public
revenue. Such provisions are construed in the manner which curbs the mischief, promote
their object, prevent their subtle evasion and foil their artful circumvention. Thus construed,
the term fraud within the meaning of these penal provisions is wide enough to take in its fold
any one or series of unlawful acts committed or omissions made. An act of fraud on Revenue
is always viewed seriously. “Fraud” and collusion vitiate even the most solemn proceedings in
any civilized system of jurisprudence. It is a concept descriptive of human conduct either by
letter or words, which includes the other person or authority to take a definite determinative
stand as a response to the conduct of the former either by words or letter.

10. Penal provisions are enacted to suppress the evils of defrauding Revenue which is an anti-social activity adversely
affecting the public revenue, earning of foreign exchange, economic and financial stability of the economy. Therefore such
provisions are construed in a manner to suppress the mischief and to promote the object of the statute, preventing evasion,
foiling artful circumvention thereof. Thus construed, the term fraud within the meaning of these penal provisions is wide enough
to take into its fold any one or series of acts committed. Such act or acts when demonstrate to be reasonably proximate to the
clearance of imports duty free on the basis of the DEPB scrips fraudulently obtained against false documents filed before DGFT,
a trader of such scrips has to face adverse consequence of law.
11. In view of the above discussions and the result of investigation as well as adjudication findings remained
unchallenged, appellant fails to succeed in his appeal having acted mala fide causing detriment to the interest of public revenue.
Ill will of appellant came to record. Preponderance of probability was in favour of Revenue and lent credence to its case.
12. Enactments like Customs Act, 1962 and Customs Tariff Act, 1975, are not merely taxing statutes but are also potent
instruments in the hands of the Government to safeguard interest of the economy. One of its measures is to prevent deceptive
practices of undue claim of fiscal incentives. Indian Evidence Act not being applicable to quasi-judicial proceeding,
preponderance of probability comes to rescue of Revenue and Revenue is not required to prove its case by mathematical
precision. Exposure of modus operandi of appellant on the basis of evidence gathered by Revenue against the appellant, making
allegations in the show cause notice, onus of proof was discharged by Revenue leaving the burden of proof to be discharged by
the appellant which remained undischarged by him. Evidence gathered by Revenue provided reasonable basis for adjudication
which could not be demolished by appellant by any means. He failed to lead any cogent evidence to rule out his active role in
commitment of the offence alleged. When he failed to come out with clean hands, no immunity from penalty can be granted to
him. Therefore irresistible conclusions that can be drawn is that Revenue having proved its case very successfully bringing out
mala fides of the appellant and his wilful commitment of breach of law, his appeal is liable to be dismissed. That is ordered
accordingly.
(Order pronounced in the Court on 27-10-2017)
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